UNITED STATES OF AMERICA
Before the
COMMODITY FUTURES TRADING COMMISSION

In the Matter of
CFTC Docket Nos. 91-8 and SD 93-11
John A. Vercillo OPINION AND ORDER

Both the Division of Enforcement ("Division") and respondent
John A. Vercillo appeal from an Administrative Law Judge's
("ALJ") decision denying Vercillo's registration as a floor
trader for five years and imposing a five-year trading prohibition. The
Division argues that the ALJ misapprehended both the gravity of
respondent's wrongdoing and his limited evidentiary showing in
mitigation. Furthermore, the Division challenges the ALJ's analysis
as unsupported by the record and inconsistent with Commission precedent
establishing guidelines for assessing these sanctions. Vercillo argues
that the ALJ's denial of his registration as a floor trader and the
five-year trading prohibition were excessive under the circumstances,
maintaining that he did not initiate any of the trades that formed the
basis of his criminal conviction and that he did not intend to harm
customers.

As explained more fully below, based on our independent assessment of the
factual record, we affirm the floor broker registration revocation and
the cease and desist order previously imposed by the ALJ, deny
Vercillo's application for floor trader registration, and impose a
permanent trading ban.

BACKGROUND

I.

This appeal arises out of two separate complaints that the Division filed
in 1991 and 1993. On June 6, 1991, the Division filed a three-count
complaint against Vercillo ("First Complaint"). Specifically,
the first two counts alleged the following six violations of Section 4b
of the Commodity Exchange Act("Act"): (I) four violations of
Section 4b(B), 7 U.S.C. 6b(B) (1988), for willfully aiding and abetting a
floor broker who willfully entered false records of contracts of sale of
soybeans for other persons; and (II) two violations of Section 4b(D) of
the Act, 7 U.S.C. 6b(D) (1988), for willfully aiding and abetting a floor
broker who filled orders by offset. With regard to these two counts, the
Division sought a cease and desist order, a suspension or revocation of
all current registrations, a trading prohibition, and a civil money
penalty.

Count III alleged that Vercillo was subject to statutory disqualification
from registration pursuant to Sections 8a(2)(D) and 8a(2)(E) of the Act,
7 U.S.C. 12a(2)(D) and 12a(2)(E)(1988), by virtue of Vercillo's
conviction for 11 felony violations in a previous criminal case. The
First Complaint alleged that in 1991 a jury convicted Vercillo of six
felony violations of Section 4b of the Act, 7 U.S.C. 6b (1988), one
felony violation of the Racketeer Influenced and Corrupt Organizations
Act ("RICO"), one felony violation of the federal mail fraud
statute, and three felony violations of the federal wire fraud statute.
U.S. v. Vercillo, 89 CR 666-18 (N.D. Ill. May 31, 1991)
("Judgment Order"). The First Complaint directed the ALJ to
hold a hearing on Count III within 30 days to determine whether Vercillo
was subject to a statutory disqualification. If the record established
that Vercillo was subject to a statutory disqualification, the complaint
directed the judge to issue an order suspending Vercillo's
registration and requiring him to show cause why such registration should
not be revoked.

In June 1991, the ALJ conducted a hearing on Count III relating to the
revocation of Vercillo's floor broker registration. Shortly
thereafter, the judge issued an order which concluded that Vercillo was
statutorily disqualified from registration, suspended his floor broker
registration for six months, and ordered him to show cause why his
registration should not be revoked.

In response to the order to show cause, Vercillo contended that
revocation of his floor broker registration was barred by the Double
Jeopardy Clause of the Fifth Amendment to the United States Constitution
("Double Jeopardy Clause"). At the same time, he moved to
dismiss the complaint as to Counts I and II, arguing that the imposition
of any civil sanctions also would violate the Double Jeopardy Clause. In
October 1991, the ALJ denied Vercillo's motion to dismiss and revoked
his floor broker registration because Vercillo had failed to provide any
evidence that his continued registration would be in the public interest.
The ALJ also ordered Vercillo to answer the first two counts of the
complaint.

In his answer to the complaint, Vercillo admitted his criminal
convictions, denied the allegations describing the activities upon which
the convictions were based, and set forth mitigating factors. He also
stated that the convictions were on appeal before the Seventh Circuit. As
an affirmative defense, Vercillo again raised the Double Jeopardy Clause.

In November 1991, the Division moved for summary disposition on the issue
of liability. Eleven days later, the ALJ granted the Division's
motion and ordered the parties to file briefs on the issue of sanctions.
Vercillo moved to vacate the ALJ's order. Citing Commission Rule
10.91(a) which provides 20 days for an adverse party to oppose summary
disposition, he requested leave to file an opposition to the
Division's motion. In January 1992, the ALJ denied Vercillo's
motion to vacate summary disposition, finding that Vercillo was
collaterally estopped from denying that he committed the acts underlying
the criminal convictions and which formed the basis of the complaint. The
ALJ, however, granted the parties additional time to file briefs on
sanctions.

In its submission on sanctions, the Division recommended that the ALJ
issue a cease and desist order and a permanent trading ban but did not
seek a money penalty. In his response, Vercillo set forth mitigating
arguments, asked that the minimum sanction be imposed, and requested a
sanctions hearing.

II.

Without regard to Vercillo's request for a hearing, in December 1992
the ALJ issued a decision on sanctions. In re Vercillo, [1992-1994
Transfer Binder] Comm. Fut. L. Rep. (CCH) 25,643 at 40,066 (ALJ Dec. 16,
1992) ("First Initial Decision"). He concluded that a cease and
desist order was appropriate because the record established that there
was a reasonable possibility that Vercillo would repeat his illegal
conduct. On the issue of a trading prohibition, the ALJ did not give
controlling weight to the sanctions imposed in the settlements cited by
the Division, holding these settlements were not a reliable barometer of
the appropriate sanction for Vercillo. Rejecting Vercillo's arguments
on mitigation and rehabilitation, the ALJ concluded that respondent's
violations adversely affected the integrity of the futures market and
imposed a seven-year trading ban. Both parties appealed.

III.

In August 1993, the Commission issued a decision finding that the ALJ
abused his discretion by denying the parties an opportunity to develop
the record on sanctions issues through an oral hearing. In this regard,
the Commission determined that the ALJ must give substantial weight to
the Congressional mandate reflected in Section 9(b) of the Act, 7 U.S.C.
13(b) (1988). The opinion went on to hold that, under Section 9(b) of the
Act, the large number of Vercillo's felony convictions under Section
4b of the Act raised a presumption that he should be banned from trading
permanently and therefore vacated the seven-year trading ban imposed by
the ALJ and remanded for a hearing to permit Vercillo to attempt to rebut
this presumption. Further, it directed the ALJ to impose a permanent
trading prohibition on Vercillo unless respondent could establish, by the
weight of the evidence, that his access to the markets regulated by the
Commission would pose no substantial risk to their integrity. The
Commission directed that respondent's rebuttal evidence should focus
on the following factors: (1) the nexus between the wrongdoing underlying
his conviction and a threat to the market mechanism; (2) circumstances
that mitigate the wrongdoing underlying respondent's conviction
(i.e., evidence which tends to show that the weight that would
ordinarily be accorded the presumption should be lessened); (3) evidence
of rehabilitation (a changed direction in respondent's activities
since the time of the wrongdoing underlying his conviction); and (4) the
role respondent intends to play in the markets regulated by the
Commission. In re Vercillo, [1992-1994 Transfer Binder] Comm. Fut.
L. Rep. (CCH) 25,836 (CFTC Aug. 13, 1993) ("Vercillo
I").

IV.

During the pendency of the appeal, Vercillo applied for registration as a
floor trader. In response, the Division challenged the application by
instituting a new proceeding in July 1993 to assess whether
Vercillo's application for floor trader registration should be denied
in light of his 11 felony convictions. Consistent with Commission Rule
1.66(b), 17 C.F.R. 1.66(b) (1997), the notice of intent to deny
registration ("Second Complaint") ordered the ALJ to ascertain
whether Vercillo was subject to a statutory disqualification from
registration. If so, the ALJ was directed to issue an order within 30
days suspending respondent's no-action status and requiring Vercillo
to show cause why his application for registration should not be denied.

In August 1993, the ALJ determined that Vercillo was subject to a
statutory disqualification pursuant to Sections 8a(2)(D) and (E) of the
Act. On this basis, the ALJ suspended Vercillo's no- action status
and directed Vercillo to show cause why his application for floor trader
registration should not be denied. Shortly thereafter, however, the ALJ
vacated his order suspending Vercillo's no-action status and ordered
that the proceedings underlying the First and Second Complaints be
consolidated.

In response, the Division sought interlocutory review of the ALJ's
ruling. We issued an order holding that interlocutory review was
appropriate because the ALJ's action deprived the Division of its
normal right to challenge the denial of a suspension request. In re
Vercillo, [1992-1994 Transfer Binder] Comm. Fut. L. Rep. (CCH) 25,837
at 40,742 (CFTC September 13, 1993) (Vercillo II). On the merits,
we ruled that suspension of Vercillo's no-action status was mandatory
under the circumstances presented and that the ALJ had abused his
discretion by consolidating proceedings without consulting the parties.
We then reinstated Vercillo's suspension and vacated the ALJ's
consolidation of the proceedings on the First and the Second Complaint,
but noted that the parties could agree that the record developed at the
hearing on the Second Complaint would serve as the basis for the
ALJ's determination of issues remaining under the First Complaint.
Vercillo II at 40,743.

V.

The ALJ conducted a hearing on remand in January 1994. In addition to his
own testimony, Vercillo offered the testimony of three witnesses. The
Division presented the testimony of FBI undercover agent Richard L.
Ostrom.

Vercillo's testimony and the documents in the record describe the
transactions underlying his felony convictions. The first incident took
place on July 27, 1988. After the close of trading and as a result of
Vercillo's complaining about prices, James Nowak, a floor broker,
sold a customer's contracts to Vercillo at a price well below market.
Vercillo, acting as a trader, sold the contracts at a $1,400 profit
immediately after purchasing them. (Vercillo's Statement Pursuant to
Section 3.60(b)(2)(ii), SD 93-11, filed November 2, 1993, at 6-7
("Vercillo's Statement"); Div. App. Br. at 9, citing
Cr. Tr. at 4201.) As a result of this transaction, Vercillo was convicted
of one felony violation of wire fraud and one felony violation of Section
4b(B) (aiding and abetting the entry of a false record).

The second incident took place on August 2, 1988. Vercillo and Nowak
matched a trade after the close because Nowak owed Vercillo money, giving
a $400 profit to Vercillo at the expense of customers. Vercillo recorded
the trades on his trading cards as occurring during regular trading
hours. (Vercillo's Statement at 7; Div. App. Br. at 10, citing
Cr. Tr. at 4203-4206.) As a result of this transaction, Vercillo was
convicted of one felony violation of wire fraud; one felony violation of
Section 4b(B) (aiding and abetting the entry of a false record); and one
felony violation of Section 4b(D) (aiding and abetting the fill of
customer orders by offset).

The third incident took place on August 23, 1988, when Nowak matched
several customer orders at a profitable price to Vercillo. Even though
the trades occurred after the close, Vercillo recorded the information as
if the trades had been executed during regular trading hours.
(Vercillo's Statement at 7; Div. App. Br. at 11, citing Cr.
Tr. at 4208-4210, 4505-4507.) As a result of this transaction, Vercillo
was convicted of one felony violation of mail fraud; one felony violation
of Section 4b(B) (aiding and abetting the entry of a false record); and
one felony violation of Section 4b(D) (aiding and abetting the fill of
customer orders by offset).

The fourth incident occurred on September 12, 1988. One of Nowak's
customers placed an order to buy at a fixed market price. In order to
settle debts that Nowak owed Vercillo, Nowak purchased contracts for the
customer from Vercillo above the market price. (Vercillo's Statement
at 8; Div. App. Br. at 11, citing Cr. Tr. at 4470-4472, 4500.) As
a result of this transaction, Vercillo was convicted of one felony
violation of wire fraud and one felony violation of Section 4b(B) (aiding
and abetting the entry of a false record).

Vercillo claimed that by engaging in these transactions he had helped
Nowak complete customers' orders or correct out trades. (Tr. at
94-95, 100.) Vercillo explained that he and the broker split the out
trades evenly, because the same result would have been achieved by
submitting them to arbitration. (Tr. at 94.) Vercillo testified that,
although at the time of the wrongdoing he knew it was illegal to be paid
with customer orders, he thought he was offering a market to a broker to
fill his order. (Tr. at 97, 100).

Vercillo testified that he had become a changed man. He claimed that he
had been humbled by his convictions and subsequent incarceration, which
had stripped him of control and self-confidence. "It was like . . .
being the living dead, just being away from everything and not being able
to effect any change in my existence," he related. (Tr. at 83-84.)
Vercillo stated that he was sorry for his wrongful conduct and testified
that the district court judge found him extraordinarily remorseful. (Tr.
at 85, 93.) He also expressed sorrow for the humiliation he brought on
his family and associates. (Tr. at 86, 93.) He added that he had returned
to the CBOT floor in June 1993 and resumed trading for about 9 weeks
without incident. Id.

Scott Early, former General Counsel of the CBOT, testified as to
CBOT's enforcement policy regarding "curb trading" at the
time Vercillo committed his violations. Noting that trading after the
close in the soybean pit was a practice "that had been ongoing . . .
for many years" prior to 1989, Early testified that its purpose was
to avoid the risk of overnight movements in the market by liquidating
open positions. (Tr. at 54-55.) Early declared that, while the CBOT
monitored trading after the close for serious abuses, curb trading was
condoned generally as a "necessary part of the marketplace, simply
because markets don't stop on a dime regardless of when the clock
does." Id. Early testified that, shortly after the
indictments of the soybean traders, the CBOT adopted a modified closing
call rule which allows limited trading after the close. (Tr. at 56-57.)

Early also testified that he knew Vercillo only by reputation prior to
1989 as a "large, aggressive, successful" trader. (Tr. at 52.)
Early recounted that he had monitored Vercillo in 1993 and found that
Vercillo's trading style was "more conservative" than
characterized by his reputation. (Tr. at 53.) Finally, Early opined that
Vercillo would not be a threat to market integrity and stated that the
CBOT was prepared to sign a supplemental sponsor certification and engage
in surveillance of Vercillo beyond that which it normally does for its
members. (Tr. at 58-60.)

Vercillo's two character witnesses, Henry Shatkin and Mark Gold,
testified as to respondent's rehabilitation.They opined that, despite
his convictions, Vercillo would not be a risk to the integrity of the
market. (Tr. at 13, 75.) Shatkin asserted that Vercillo was a changed
person, "the cockiness and the spunkiness were gone." (Tr. at
11.) Shatkin testified that he had encouraged Vercillo to return to the
market in order to regain his self-confidence. (Tr. at 12.) Shatkin
observed that, upon his return to trading, Vercillo no longer displayed
risky behavior and stayed within the rules and regulations. (Tr. at 13.)
Gold also attested to Vercillo's change in character and remorse.
(Tr. at 75-78.)

FBI undercover agent Richard Ostrom testified on behalf of the Division.
(Tr. at 17-18.) Ostrom described several schemes of traders and brokers
to withhold customer orders from the market and to trade them after the
market had closed for their own profit at the expense of customers. (Tr.
at 19-23.) Demonstrating that the acts for which Vercillo was convicted
were not isolated incidents, Ostrom testified that he had engaged in a
number of money passes with Vercillo. (Tr. at 44.) Ostrom also testified
that he had observed Vercillo engage in prearranged trades in order to
settle a debt with a broker. (Tr. at 25-27.) In addition, Ostrom
testified that Vercillo used the practice of trading after the close as
an extension of his regular trading day to initiate and to offset new
positions, conduct that would not be permitted under the CBOT new
modified closing call rule. (Tr. at 29-30.) According to Ostrom, on
several occasions Vercillo tried to disguise his illegal conduct, even
stating, "I don't trade on the curb. It's against the
law." (Tr. at 30-31.) VI.

The ALJ issued a decision on remand in May 1994. In re Vercillo,
[1992-1994 Transfer Binder] Comm. Fut. L. Rep. (CCH) 26,083 (CFTC May 23,
1994) ("Second Initial Decision"). The ALJ concluded that
Vercillo had produced clear and convincing evidence to rebut the
presumption that he should be barred permanently from registration with
the Commission. In addition, the judge held that Vercillo had rebutted,
by the weight of the evidence, that he should be denied access
permanently from the markets regulated by the Commission. Id. at
41,595. The ALJ examined the record as to the trading prohibition by
referring to the factors set forth by the Commission in Vercillo
I. While the judge found a nexus between Vercillo's wrongdoing
and the market integrity, he found that the threat of repetition of the
violative conduct had been eliminated by a subsequent rule change by the
CBOT. Id. at 41,593.

With respect to mitigation, the ALJ held that Vercillo had produced
sufficient evidence of circumstances which lessened the seriousness of
his wrongdoing. First, the ALJ decided that Vercillo's wrongful
transactions did not reflect an intent to cheat or defraud customers and
that his conduct amounted to crimes of "convenience" rather
than crimes of "greed." Id. Second, the ALJ accorded
great weight to the testimony of Scott Early and found that, at the time
of the wrongdoing, trading after the close was a common practice condoned
by CBOT officials. Id. In reliance on the rule change permitting a
post-close trading session at the CBOT, the ALJ concluded that "some
of the conduct for which Vercillo was convicted would be legal
today." Id. Finally, the ALJ determined that the Division did
not argue that there were aggravating circumstances. Id.

Turning to rehabilitation, the judge focused on the time that had passed
since Vercillo's wrongdoing, noting that Vercillo's illegal
conduct took place in 1988 and that he had not been accused of any
wrongdoing since then. Id. at 41,594. Second, despite testimony
that Vercillo knew the wrongful nature of his conduct and sought to
disguise it, the ALJ concluded that Vercillo did not think he was
defrauding customers. Thus, the judge found that Vercillo's
expressions of contrition were genuine. Id. Finally, the ALJ
acknowledged that the witnesses "might not be deemed experts on
rehabilitation issues," but held that their testimony regarding
Vercillo's character should be accorded "some weight" in
evaluating Vercillo's rehabilitation. Consequently, the ALJ found
that Vercillo had shown some degree of rehabilitation. Id. On the
issue of Vercillo's role in the marketplace, the ALJ noted that
Vercillo was willing to limit his participation to floor trading and to
be supervised by a sponsor. Id.

The ALJ concluded that Vercillo had rebutted, by clear and convincing
evidence, the presumption that his registration should be denied
permanently and held that he could reapply in five years. In addition,
the ALJ found that Vercillo had rebutted, by the weight of the evidence,
the presumption that he should be prohibited permanently from trading and
imposed a five-year trading ban. Both the Division and Vercillo appealed.

DISCUSSION

I.

On appeal, Vercillo urges us to accord deference to the ALJ's
favorable findings of mitigation and rehabilitation and contends that the
ALJ's decision to deny his registration and to impose a trading ban
for five years was excessive. Additionally, Vercillo contends that the
imposition of a five-year ban at this time is a greater penalty than the
seven-year ban originally imposed because the first trading ban was
imposed more than two years ago.

With respect to mitigation, Vercillo urges us to take into account the
fact that, while he knew it was wrong to trade after the close, the
practice was condoned by the CBOT and customers routinely anticipated and
took advantage of the "curb market." (Resp. App. Br. at 8-9.)
Second, Vercillo contends he did not initiate a single illegal trade but
merely accommodated one broker. (Resp. App. Br. at 10.) Finally,
respondent argues that the relatively small restitution
amount--$1,800--indicates that he did not engage in these trades for
profit. In addition, he asserts that traders sanctioned with far less
than a five-year ban had caused much greater harm to customers.
Id.

With respect to rehabilitation, Vercillo argues that there would be no
harm to the market integrity if he were allowed to return to the trading
floor. Vercillo avers that he obeyed exchange trading rules during his
nine weeks on the floor in 1993 and that he has committed no other
violations since 1988. He also stresses the crediting of his expression
of remorse by the ALJ and the district court judge and the testimony of
his witnesses. (Resp. App. Br. at 10-11.) Finally, Vercillo urges us to
consider the time he has been away from the markets as sufficient to
demonstrate his rehabilitation.

For its part, the Division argues that the ALJ should have imposed a
permanent trading ban and that Vercillo's registration denial should
not have been limited to five years. Relying on portions of the
transcript from the criminal trial, the Division contends that
Vercillo's wrongdoing reveals a "willful and flagrant"
scheme that benefited brokers and traders at the expense of customers.
(Div. App. Br. at 8.)

The Division challenges the ALJ's finding that Vercillo did not
intend to defraud customers as inconsistent with the jury's
conclusion in the criminal case. (Div. App. Br. at 16; Div. Ans. Br. at
6.) In addition, the Division contends that the CBOT's rule change is
not a mitigating factor because the modified closing call rule does not
permit the type of illegal transactions underlying Vercillo's felony
convicti ons. (Div. App. Br. at 17-18.) Turning to the issue of
rehabilitation, the Division argues that the nine-week period that
Vercillo resumed trading on the floor was too brief to be indicative of a
significant change in character. Challenging the ALJ's finding that
Vercillo expressed genuine contrition for his wrongdoing, the Division
asserts that Vercillo's showing of regret was not adequate or
reliable since he knew that his conduct was wrong at the time of the
violations and never apologized to the customers. (Div. App. Br. at
23-25; Div. Ans. Br. at 7.) Finally, the Division avers that the
character testimony of Vercillo's three witnesses is conclusory and
unreliable. (Div. App. Br. at 25-26.)

II.

We have reviewed the entire record and determined that the weight of the
evidence supports the following findings and conclusions. We consider
first the denial of Vercillo's application for floor trader
registration.

Proof of Vercillo's statutory disqualification under Sections
8a(2)(D) and (E) of the Act raises a presumption that he is unfit to act
as a Commission registrant. In re Horn, [1990- 1992 Transfer
Binder] Comm. Fut. L. Rep. (CCH) 24,836 at 36,939 (CFTC Apr. 18, 1990).
This presumption rests on the common sense inference that, once an
individual has committed serious wrongdoing, there is a substantial risk
he will undertake similar wrongdoing in the future. In re Akar,
[1986-1987 Transfer Binder] Comm. Fut. L. Rep. (CCH) 22,927 at 31,708
(CFTC Feb. 24, 1986). Thus, Vercillo may only retain his floor broker
registration and qualify for floor trader registration by making a clear
and convincing showing that his continued registration would not pose a
substantial risk to the public. See Commission Rule 3.60(e)(1), 17
C.F.R. 3.60(e)(1)(1997); Horn, 24,836 at 36,939 n.15.

First, we assess the nature and gravity of Vercillo's misconduct.
Vercillo was convicted of 11 felonies, including six felonies under
Section 4b of the Act, for entering false records and illegally
offsetting customer orders. Vercillo does not dispute that his felony
convictions raise a presumption that he should be disqualified from
registration. Vercillo's claim that he did not intend to harm the
customers is inconsistent with the jury's conclusion in the criminal
case. Vercillo's conviction of six Section 4b violations conclusively
establishes that he willfully acted to the detriment of customers.

The Seventh Circuit's opinion in Ashman, 979 F.2d at 492,
describes Vercillo as a local trader who functioned as a
"bagman" for Nowak. The court stated that "Vercillo [was]
well aware that [he was] part of an ongoing and flexible agreement to
commit fraud as the need--or perhaps the opportunity--arose."
Id. The court set forth an example: when Nowak had trouble picking a
price for a trade with FBI undercover agent Ostrom, it was Vercillo who
suggested that the prices be set to give Ostrom the maximum available
profit. The defendants, including Vercillo, "agreed to commit a
pattern of racketeering activity." Id. Based on the evidence,
it is clear that Vercillo's violations were numerous, intentional and
serious.

Vercillo nevertheless contends that the small amount of the restitution
ordered evidences that his conduct did not harm customers. However, the
Seventh Circuit specifically rejected this argument in the course of
reviewing the appeal of Vercillo and his co-defendants during the
underlying criminal proceeding. The court found that the prices for
matched trades were selected so that floor traders like Vercillo would
profit from the transactions. The court also found that customers were
harmed by the practice of matching trades because the systematic
assignment of prearranged prices to their orders denied them an
opportunity to earn a profit. In light of Vercillo's felony
convictions under Section 4b of the Act, RICO, and the federal mail and
wire fraud statutes, it is clear that Vercillo caused grave harm to
customers and the market place.

We do not agree with Vercillo that alleged widespread trading after the
market close at the CBOT--even if true-- mitigates his wrongdoing. First,
to the degree that Vercillo claims that this evidence shows
"confusion" as to the legality of his conduct, we disagree. All
CBOT members, including Vercillo, were on notice that noncompetitive
trading was illegal. At the time of Vercillo's violations, Commission
Rule 1.38, 17 C.F.R. 1.38 (1988), provided that noncompetitive trades
were unlawful unless executed "in accordance with written rules of
the contract market which have been submitted to and approved by the
Commission." The CBOT did not have a written rule that authorized
members to use noncompetitive trades to execute trades after the market
close, and Vercillo's evidence does not demonstrate any legitimate
confusion about the legality of his conduct. Second, respondent does not
explain how the prevalence of late trading caused him to commit six
felony violations of Section 4b of the Act by deceiving his customers or
offsetting customer orders to customers' disadvantage.

Third, we view evidence that others at the CBOT may have acted illegally
during this period as providing little basis for mitigation. To the
contrary, we view the exchange's inability or unwillingness to
enforce compliance with applicable law as giving rise to a greater need
for the Commission to impose sufficiently significant sanctions to deter
others from similar behavior and to protect the public interest. Nor do
we believe that the fact that others at the CBOT also may have violated
the Act and Commission rules in any way lessens Vercillo's personal
culpability.

Nor does the CBOT's subsequent adoption of a rule permitting a
limited period of trading after the market close justify Vercillo's
misconduct. The new rule does not permit prearranged transactions such as
those entered by Vercillo in which prices are assigned to the detriment
of customers.

Based on the foregoing analysis, we conclude that Vercillo has failed to
produce significant evidence to mitigate the seriousness of his
wrongdoing and that the presumption that arises as a result of his
numerous felony convictions is strengthened in this case by a pattern of
illegal behavior. Accordingly, we turn to the issue of "the changed
direction of his activities," which is the focus of a rehabilitation
analysis. CompareHorn, 24,836 at 36,940; In re
Tipton, [1977-1980 Transfer Binder] Comm. Fut. L. Rep. (CCH) 20,673
at 22,750 n.9 (CFTC Sept. 22, 1978); Akar, 22,927 at 31,709-10.

Our rehabilitation inquiry begins with respondent's conduct from
"the time of the wrongdoing underlying the statutory
disqualification . . . ." 17 C.F.R. 3.60(b)(2)(ii)(B)(1996).
Vercillo contends that he recognized and regretted his wrongful conduct
soon after the underlying misconduct. (Resp. App. Br. at 11.) In support
of this argument, Vercillo points out that the district court judge had
observed that he exhibited extraordinary acceptance of responsibility for
his conduct and granted him an additional point reduction under the
Federal Sentencing Guidelines. (Resp. App. Br. at 3.)

We have previously noted that expressions of contrition following
detection deserve significant weight only if the wrongful nature of the
conduct was unclear at the time of the violations. Horn, 24,836 at
36,940. As demonstrated, Vercillo has not shown that he was confused
about the illegality of his conduct at the time of his wrongdoing.

Vercillo also urges us to consider the character testimony of his
witnesses. As a general rule, we do not accord significant weight to the
character testimony of a witness unless such witness was qualified as an
expert. CompareIn re Walter, [1987-1990 Transfer Binder]
Comm. Fut. L. Rep. (CCH) 24,215 at 35,015 (CFTC Apr. 14, 1988) (probation
officer, who worked closely with respondent for significant period after
his conviction, had experience and expertise that buttressed the
reliability of his opinion that respondent did not present negative risk
to community), withIn re LeClaire, [1994-1996 Transfer
Binder] Comm. Fut. L. Rep. (CCH) 26,282 at 42,428 (CFTC Dec. 12, 1994)
(noting that almost every respondent can produce evidence such as
testimony from a friend or colleague attesting to the witness's trust
in respondent and belief he will not repeat his violative conduct).
Vercillo did not attempt to qualify any of the witnesses as experts in
the area of rehabilitation.

Even apart from this general weakness, the character testimony of
Vercillo's witnesses is not persuasive. These witnesses made only
passing reference to the requirements of the Act or the Commission's
regulations in analyzing respondent's conduct and the propriety of
his illegal trading. The testimony reflected at best a perfunctory
concern with the customers harmed by Vercillo's wrongdoing. In short,
respondent's character witnesses showed limited appreciation for the
interest of the public.

In addition, Vercillo contends that he has committed no wrongdoing in the
six years which have passed since the misconduct underlying his felony
convictions. Respondent emphasizes that he traded without incident during
the period following his return to the market in the summer of 1993. The
inference of a "changed direction" is undercut by the fact
that, at the time of the hearing before the ALJ, Vercillo had resumed
trading for only nine weeks out of the last six years and he was subject
to an outstanding administrative complaint when he returned to the
market. As we have noted in the past, the weight accorded such evidence
must be limited in these circumstances. In re Silverman,
[1977-1980 Transfer Binder] Comm. Fut. L. Rep. (CCH) 20,410 at 21,643
(CFTC Mar. 14, 1977), aff'd sub nom.Silverman v. CFTC,
562 F.2d 432 (7th Cir. 1977). At any rate, we consider nine weeks of
trading without disciplinary action as too short a period to demonstrate
a change in direction.

Ultimately, we must weigh Vercillo's rebuttal evidence against the
presumption raised by his 11 felony convictions, including six felony
violations of Section 4b. If as Sections 8a(2)(D) and (E) indicate, a
single felony conviction raises a presumption of unfitness for continued
registration, 11 felony convictions raise a much stronger presumption to
overcome. Further, although the conduct underlying one felony conviction
is conceivably attributable to a unique misstep, Vercillo's 11 felony
convictions reflect a pattern of conduct that establishes a strong
likelihood that the wrongdoing will be repeated.

In light of our evaluation of the record as a whole, we conclude that
Vercillo has failed to make a clear and convincing showing that his
registration either as a floor broker or floor trader would pose no
substantial risk to the public. Accordingly, we deny Vercillo's
application for registration.

III.

We turn next to the Division's argument that Vercillo should be
prohibited from trading permanently. Proof of Vercillo's six felony
convictions under Section 4b of the Act gives rise to the presumption
that he should be banned permanently from trading pursuant to Section
9(b) of the Act. Vercillo I, 25,836 at 40,740. Thus, respondent
may continue to trade only if he shows by the weight of the evidence that
his continued access to markets regulated by the Commission will pose no
substantive risk to their integrity. Id. We have already
determined that there is a nexus between respondent's wrongdoing and
a threat to the market mechanism. Id. at 49,739.

With respect to the role he intends to play in the market, Vercillo
proposes to trade as a floor trader, the same role in which he was
functioning at the time of his wrongdoing. In essence, this would put him
in a position to repeat his misconduct. Moreover, this proposal is based
on the assumption that respondent's application as a floor trader
would be granted. As discussed above, we have determined not to grant
Vercillo's registration application.

We have already assessed respondent's mitigation evidence. Even in
light of the less onerous weight of the evidence standard, we are not
persuaded that the weight accorded to the presumption arising from six
Section 4b felony convictions should be lessened. A single Section 4b
felony conviction raises a statutory presumption of a five-year trading
ban under Section 9(b). We have found that, under the terms of the
statute, the presumption arises without regard to the nature or gravity
of the offense. In this case, Vercillo was convicted of multiple felony
violations of Section 4b.

Furthermore, the wrongdoing underlying Vercillo's Section 4b felony
convictions is aggravated by evidence of a pattern of related violative
conduct. In addition to the six felony violations under Section 4b,
Vercillo was convicted of RICO, and mail and wire fraud violations. Such
a pattern of misconduct establishes a strong likelihood that wrongdoing
will be repeated. Based on the foregoing analysis, we conclude that
Vercillo has failed to mitigate the seriousness of his wrongdoing and
that the presumption that arises as a result of his six Section 4b felony
convictions is strengthened in this case by a pattern of illegal
behavior. Moreover, as we established above, Vercillo's evidence is
not sufficient to support a finding of rehabilitation, even when assessed
by the weight of the evidence standard.

In light of our evaluation of the record as a whole, we conclude that
Vercillo's limited evidence of mitigation and rehabilitation does not
establish that Vercillo's continued access to the markets we regulate
would pose no substantial risk to their integrity. Accordingly, we find
that Vercillo should be prohibited permanently from trading on markets
regulated by the Commission.

CONCLUSION

Based on the mandates of Sections 8a(2) and 9(b) and our assessment of
the record as a whole, we conclude that respondent should be denied
registration as a floor trader and prohibited permanently from trading on
the markets regulated by the Commission. The noncompetitive trading
practices in this case require us to impose a sanction of this magnitude
to deter and to prevent this type of conduct in the future. The U.S.
commodities markets are important mechanisms for price discovery and
hedging. Open and competitive trade execution is vital to the proper
functioning of these markets. To maintain the integrity of our markets
and market users' trust in them, noncompetitive conduct like that
engaged in by respondent Vercillo cannot be tolerated. The trading
practices brought to light in this case were a disgrace to the futures
industry, as well as to respondent Vercillo. The Commission hopes that
recent improvements to the exchange's surveillance and audit trail
systems have reduced the likelihood of such violations of law, as well as
increased the likelihood of detection when such violations occur.

The trading prohibition and the floor trader registration application
denial, and the cease and desist order and the floor broker registration
revocation previously imposed by the ALJ, shall become effective 30 days
from the date this order is served.

IT IS SO ORDERED.

By the Commission (Chairperson BORN, and Commissioners DIAL, TULL, HOLUM,
and SPEARS).